SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For SUPPLEMENTAL DISCLOSURE
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QUEBECOR WORLD INC. (Formerly known as Quebecor Printing Inc.)
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(Translation of Registrant's Name into English)
612 Saint-Jacques Street, Montreal, Quebec, H3C 4M8
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(Address of Principal Executive Office)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F)
Form 20-F Form 40-F X
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(Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
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Press Release
of
QUEBECOR WORLD INC.
(Formerly known as Quebecor Printing Inc.)
Filed in this Form 6-K
Documents index
1. Supplemental Disclosure
[QUEBECOR WORLD LOGO]
QUEBECOR WORLD INC.
SUPPLEMENTAL DISCLOSURE
AS FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8th, 2002
PENSION FUND INFORMATION
FOR PUBLIC RELEASE ON JULY 8th, 2002
http://www.quebecorworld.com/htmen/20_0/pdf/0702-supp_disclosure.pdf
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS
DOCUMENT ARE FORWARD-LOOKING AND MADE PURSUANT TO THE SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES, WHICH MAY CAUSE
ACTUAL RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY FROM FORECASTED
RESULTS. THOSE RISKS INCLUDE, AMONG OTHERS, CHANGES IN CUSTOMER DEMAND FOR
OUR PRODUCTS, CHANGES IN RAW MATERIAL AND EQUIPMENT COSTS AND AVAILABILITY,
SEASONAL CHANGES IN CUSTOMER ORDERS, PRICING ACTIONS BY OUR COMPETITORS AND
GENERAL CHANGES IN ECONOMIC CONDITIONS.
ALL DOLLARS AMOUNTS IN US DOLLARS UNLESS OTHERWISE NOTED.
1
BACKGROUND
A number of investors and analysts have made enquiries following recent media
coverage regarding pension benefit obligations and funding exposure for large
companies that are part of the S&P/TSX 60.
The media coverage draws from research prepared by sell-side research
analysts. For example, a recent research report examines the 47 S&P/TSE 60
companies for which pension information is available. During the period from
December 31, 2000 to 2001, the aggregate pension plan surplus of nearly
$13 billion reversed itself into a $2.9 billion deficit. At the end of 2001,
only 28% of the companies covered enjoyed a plan surplus, compared with
70% in 2000. Quebecor World is mentioned as one of 33 companies having
funding exposure.
2
QUEBECOR WORLD PENSION FUND STATUS
Quebecor World maintains defined benefit plans for its employees in Canada
and the U.S.A. As at September 30th, 2001 the fair value of plan assets which
support the pension plans was $481.9 million, compared to liabilities
measured at December 31, 2002 of $731.5 million. The Company elected to use
September 30th asset values in order to provide investors with more timely
disclosure of the year-end financial statements and MD&A. A copy of Note 20
(Pension and other postretirement benefits) to the Company's audited
Financial Statements for the period ended December 31, 2001 is attached.
Management of Quebecor World is continuously assessing its funding exposure,
actuarial and accounting assumptions, including discount rates, expected
return on plan assets and the rate of compensation increases.
Like most companies of Quebecor World's size, the current funding exposure is
largely the result of difficult global equity capital markets in the last
2 years, predominantly in the U.S. where the majority of the Company's pension
fund assets are invested and where more than two-thirds of the Company's
workforce is employed.
3
CANADIAN PENSION PLANS
The funded status of Quebecor World's Canadian pension plans was 99% at
September 30, 2001, compared with a funded status in excess of 140% for the
preceding three years. In the aggregate, the change in funding status for the
Canadian pension plans resulted from amendments made to the plans, effective
January 2001, and from the fact that no employer contributions were required
during the period from 1998 to 2001. Key actuarial and accounting assumptions
for Canadian pension plans have recently been reviewed and management
currently believes they are appropriate.
4
U.S. PENSION PLANS
Costs and liabilities for the U.S. pension plans include former plans
sponsored by Quebecor Printing (U.S.A.) Inc. and World Color Press, Inc.,
prior to the Merger in 1999. The salaried plans were merged and amended as of
December 31, 2000. The funded status of all U.S. pension plans has eroded by
approximately US $100 million during the period from December 31, 1998 to
2001, partially due to a reduction in asset values and partially due to
improvements to the benefits offered.
Management became sensitive to the need for additional funding of its U.S.
pension plans last year and accommodated this need in its business planning
for 2002. Management intends to increase company contributions in 2002 in
order to begin to address the funding exposure, taking into account legal
requirements and tax implications, and despite the relief provided by recent
legislation in the U.S. (the job creation and workers assistance act, passed
in March, 2002). The company's cash flow is sufficient to make contributions
in excess of the minimum funding requirement, if management deems appropriate.
5
PENSION EXPENSE AND FUNDING IMPACTS
Quebecor World provided earnings, free cash flow and other guidance for 2002
on October 29th, 2001 and reaffirmed this guidance on a number of occasions
during 2002. The funded status of the Company's pension funds were known to
and accounted for by management at that time; the impact on earnings and
funding requirements is reflected in this guidance of $1.85 - $2.00 of
earnings per share and $300 million of free cash flow for the year ending
December 31st, 2002.
Generally Accepted Accounting Principles (GAAP) for recognizing pension fund
expense reflect the long term nature of the obligations inherent in defined
benefit pension plans. Various smoothing techniques are available that will
reduce the volatility in pension expense that would otherwise occur in a
turbulent capital market environment. Following GAAP, the expected
incremental pension expense in 2002 attributable to prior years' investment
losses is approximately $4.5 million pre-tax. This figure was reflected in
management's financial guidance provided in October, 2001.
6
ACTUARIAL ASSUMPTIONS
Quebecor World is currently reviewing its actuarial assumptions in light of a
changed capital markets environment. The Company reduced the discount rate
used in establishing the projected benefit obligation from 7.7% in 2000 to
7.0% in October, 2001. Management believes that this level is appropriate
based on the current environment. Similarly, the assumed rate of compensation
increase was reduced from 3.7% in 2000 to 3.4% in 2001, and management
believes this is also considered appropriate based on the current
environment. While management is currently reviewing the assumed return on
assets for its Canadian pension plans, no material change is expected or
considered necessary.
The assumed return on assets for the Company's U.S. plans is also being
reviewed for its appropriateness in the current environment, and is expected
to be reduced. The impact of a 100 basis point reduction in the assumed
return on U.S. plan assets is approximately $5 million pre-tax, or 2 cents
per share after tax.
7
SUMMARY
Among the largest S&P/TSX 60 companies, approximately 25% reported pension
income in 2001, representing on average approximately 1% of their net income.
In 2001, Quebecor World recognized $14.2 million of pension expense, or a
deduction of approximately 6% of its net income (before restructuring and
other charges).
The long term nature of defined benefit obligations is reflected under GAAP.
The impact of the current capital markets environment on the Company's net
income is relatively small. The Company's strong cash flow generating
capacity currently provides it with flexibility to increase funding in excess
of the minimum required level.
8
NOTE 20
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20. PENSION AND OTHER POSTRETIREMENT BENEFITS
The Company maintains defined benefit pension plans for its employees. The
Company's policy is to maintain its contribution at a level sufficient to
cover benefits. Actuarial valuations of the Company's various pension plans
were performed during the last three years.
The Company provides postretirement benefits to eligible employees. The
costs of these benefits, which are principally health care, are accounted
for during employees' active service period.
The following table is based on a September 30th measurement date in 2001
and a December 31st measurement date in 2000. The table provides a
reconciliation of the changes in the plans' benefit obligations and fair
value of plan assets for the fiscal years ended December 31, 2001 and
December 31, 2000 and a statement of the funded status as at December 31,
2001 and December 31, 2000:
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Pension Postretirement
Benefits Benefits
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2001 2000 2001 2000
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CHANGE IN BENEFIT OBLIGATION
Benefit obligation, beginning of year $ 624.4 $ 573.1 $ 70.5 $ 66.3
Change in measurement date (26.4) - 1.1 -
Service cost 25.0 21.2 0.8 0.7
Interest cost 48.5 45.3 5.4 5.3
Plan participants' contributions 4.0 3.3 2.0 0.5
Plan amendments 5.3 0.5 (1.1) -
Curtailment loss (gain) 0.9 0.3 (2.4) (0.7)
Settlement loss - 0.3 - -
Actuarial loss 77.7 25.5 8.5 3.7
Change in assumptions 3.9 8.6 0.2 0.8
Benefits paid (40.8) (50.4) (7.8) (6.0)
Settlement paid - (0.4) - -
Foreign currency changes 9.0 (2.9) (0.2) (0.1)
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Benefit obligation, end of year $ 731.5 $ 624.4 $ 77.0 $ 70.5
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CHANGE IN PLAN ASSETS
Fair value of plan assets, beginning of year $ 566.0 $ 553.1 $ - $ -
Change in measurement date 47.7 - - -
Actual return on plan assets (123.6) 44.7 - -
Employer contributions 17.3 18.6 5.8 5.5
Plan participants' contributions 4.0 3.3 2.0 0.5
Settlement loss - - - -
Settlement paid - (0.4) - -
Benefits paid (40.8) (50.4) (7.8) (6.0)
Foreign currency changes 11.3 (2.9) - -
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Fair value of plan assets, end of year $ 481.9 $ 566.0 $ - $ -
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RECONCILIATION OF FUNDED STATUS
Funded status $ (249.6) $ (58.4) $ (77.0) $ (70.5)
Unrecognized net transition asset (5.4) (4.2) - -
Unrecognized prior service cost 7.0 2.6 (0.6) -
Unrecognized actuarial loss 194.0 4.7 7.7 1.3
Adjustment for fourth quarter contributions 4.2 - 1.4 -
Valuation allowance (0.1) (1.1) - -
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Net amount recognized $ (49.9) $ (56.4) $ (68.5) $ (69.2)
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20. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
Included in the above benefit obligation and fair value of plan assets at
year-end are the following amounts in respect of plans that are not fully
funded:
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Pension Postretirement
Benefits Benefits
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2001 2000 2001 2000
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Benefit obligation $ (719.1) $ (446.9) $ (77.0) $ (70.5)
Fair value of plan assets 467.6 342.3 - -
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Funded status - plan deficit $ (251.5) $ (104.6) $ (77.0) $ (70.5)
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The following table provides the amounts recognized in the consolidated
balance sheets:
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Pension Postretirement
Benefits Benefits
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2001 2000 2001 2000
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Accrued benefit liability $ (74.2) $ (86.3) $ (68.5) $ (69.2)
Prepaid benefit costs 24.3 29.9 - -
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Net amount recognized $ (49.9) $ (56.4) $ (68.5) $ (69.2)
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The following table provides the components of net periodic benefit cost:
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Pension Postretirement
Benefits Benefits
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2001 2000 1999 2001 2000 1999
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Service cost $ 25.0 $ 21.2 $ 19.9 $ 0.8 $ 0.7 $ 0.7
Interest cost 48.5 45.3 32.6 5.4 5.3 3.3
Expected return on plan assets (58.1) (53.8) (34.7) - - -
Amortization of transitional assets (0.6) (0.5) (0.3) - - -
Amortization of prior service cost 0.3 0.3 0.2 (0.4) - -
Amortization of actuarial (gain) loss (0.9) (1.8) 0.4 - - 0.1
Curtailment loss (gain) 0.9 - 1.6 (0.4) (0.5) -
Valuation allowance (0.9) (3.0) 4.1 - - -
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Net periodic cost $ 14.2 $ 7.7 $ 23.8 $ 5.4 $ 5.5 $ 4.1
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20. PENSION AND OTHER POSTRETIREMENT BENEFITS (CONTINUED)
The weighted average assumptions used in the measurement of the Company's
benefit obligation are as follows:
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Pension Postretirement
Benefits Benefits
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2001 2000 1999 2001 2000 1999
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Discount rate 7.0% 7.7% 7.9% 7.2% 7.7% 7.9%
Expected return on plan assets 9.7% 9.7% 9.2% - - -
Rate of compensation increase 3.4% 3.7% 4.4% - - -
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The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation was 8.8% at the end of 2001 and the same
as 2000 and is expected to decrease gradually to 5.0% in 2008 and remain at
that level thereafter. A one percentage point change in assumed health care
cost trend would have the following effects:
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Postretirement benefits
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Sensitivity analysis 1% increase 1% decrease
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Effect on service and interest costs $ 0.6 $ (0.5)
Effect on benefit obligation 5.8 (5.2)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUEBECOR WORLD INC.
By: /s/ Michael Young
Name: Michael Young
Title: Senior Vice President,
Financial Operations and Control
Corporate Controller
Date: July 8, 2002